In terms of when YOU can draw your pension benefits depends upon the Rules of your pension scheme. From 6th April 2006, much more flexibility has been introduced into pension legislation, and you may be allowed (subject to the Scheme Rules) to take your benefits at different times.
Early payment may have been an option for you when were an active member - although schemes do not have to allow this option within the Scheme Rules. Under the terms of your employment, you may have had a contractual right to take your pension benefits earlier than your Normal Retirement Date (this would usually have been detailed within your Contract of Employment or Terms of Engagement letter).
Having been made redundant, you will now be classed as a preserved member. In this respect, it is essential that you understand that your Scheme Rules may have different terms and conditions in respect of early payment for preserved members.
Examples of differences include:
- A complete loss of the option for you to be able to retire early as a preserved member.
- You may have lost access to potentially generous early retirement provisions which were only available to active members, if such generous terms existed in your scheme.
- Any penalties which apply for taking your benefits early may be greater for preserved members than for active members.
- Whilst early payment may be available now for preserved members, it may be withdrawn in the future.
- If you were close to your Normal Retirement Date when you were made redundant, your redundancy settlement may have included an improved early retirement package. If you did not take advantage of this at the time, this option may no longer be available.
- If the Scheme Rules give you the right to early payment, you may require the consent of the trustees or the consent of the employer (or both).
If early payment is important to you, it is essential that you investigate whether it is available and whether the terms of early payment changed when you became a preserved member. You need to know what they are now as opposed to what they were when you were an active member of the scheme. Keep informed – is your scheme likely to withdraw the early payment option for preserved members in the future?
People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences.
This Quicknote forms part of our Module about Redundancy and should be read alongside the other Factsheets and Quicknotes in the series.
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
Redundancy: Changes to early payment – v1.3 Preserved members
Last reviewed 12/08/2009